The Devaluation of fiat money is powered by Inflation

[darkangel11]

Gold doesnt go up in value, it has no yield either so it should not be kept for profit especially.  The biggest point is stability in that its inert and able to exist outside of these FIAT paper problems, also most of the world will accept gold so its a link to international trade.  People like to compare crypto with gold, they are different but its understandable due to similar advantages.

Gold always shows higher price

Bullshit!



You can clearly see that if you bought gold between March and June you're at a loss.

According to my experience gold never disappointed its holders and its true that for sometime it downs but when we compare its price on annual basis so we can conclude that gold is always better in price than previous year.

Another bullshit.

Check gold prices in the period of 1993 and 99. Not only it wasn't up each year but going down. If you bought it anywhere between 93 and 96, you were down on your investment in 97, 98 and 99, so 4 years of flat prices were followed by 3 years of falling prices, reaching 40% loss in August and September of 99.
This was a bloodbath for a relatively safe asset like gold. When bitcoin loses 10% everybody screams about crash and a bear market, so imagine what was happening when gold was losing 10% a year for 3 consecutive years

Bottom line, no investment is perfect and all of them require patience, but I'd take bitcoin over gold any time.

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[stompix]

Inflation is one of the economic terms that is often misunderstood. In a good economic system, controlled inflation is necessary to create value on the commodity and to force consumers to spend instead of displacing. As an example of the importance of inflation (in its simple sense, which means an increase in product prices), we can ask why prices do not increase in Japan^[1] and how It was bad for the economy^[2].

The biggest misunderstanding that Japan can help overcome is that by simply printing money you don't always generate inflation, inflation is not just the result of throwing money at your citizens, it's the result of your citizens spending that money in a way that the manufacturing and service sector can't keep up with it.

I think that talking about such a subject requires more, but this story in brief.

[1] https://www.asahi.com/ajw/articles/144621

From the article, I have a few questions. 
If the cost of a product is $20 for example, there is no way that product can be sold for $15 just because that's the price that the people will buy. No company would operate like that. A company would food eventually if they followed this business model. The goal is to make a profit, so if they're not making a profit then there's no point in the business.
Or, they're making a profit but not much. For example, they make just $2 out of a $20 product. Isn't that a good thing that a company can't exploit people and make excessive profits off of them?

The first thing when analyzing how a company is run is to drop your bias about the company making excessive profits just because it sells stuff you think is worth 1$ for 10$. There are so many costs in the process of selling a product that sometimes they completely overshadow the production costs, not even mention the initial investment, yeah I pay $100 for a bag of grain that will earn me in autumn 20 tons of wheat so I should sell the wheat for 1 cents a kilo, except for the fact that one s770 harvester costs 300k!

Another thing is that operating at a loss might be better than shutting down, it all depends on the sunken cost  some might just go like this for years as pulling completely out would trigger heavier losses, the best example comes actually from bitcoin mining, there are tens of them trapped in this, if they stop mining at 1 cents profit they incur such heavy losses that they don't even want to think about.

Does it mean that the forces of demand and supply don't play a role in the determination of prices in Japan? From the article, I can conclude that it is the people who determine the price, so no matter how the market is, the buyers still determine the price.

The buyers always determine the price, if people stop buying the price will either go down or the company will go out of business, if the people clean up the shelves the investors and the board of that company would have to be stupid not to increase the price, wouldn't you do the same?

The devaluation of currency can be caused by inflation.
~

Inflation will always cause the devaluation of a currency, devaluation of a currency will also result, although in some cases with a bit of a delay, in inflation, at least when it comes to consumer prices.

[safar1980]

so anyone understands that with rising inflation comes devaluation. but if you look at the example of agriculture, when the country has a poor potato harvest but a good rice harvest, should inflation occur?
Won't the poor stop buying expensive potatoes? It is logical that they will buy cheaper rice and there will be no inflation.

Inflation does not around only about the prices of the commodities, its actually based in a whole market sentiment of one country, the monetary policies also a big contributor for the inflation. Yes there’s an alternative but considering the generations now, we are still buying the things that we want even if its too expensive or even if there’s a cheaper alternative, and that’s how many deal with the inflation.

I think that only those people whose income is ahead of expenses can buy goods at higher prices. And if we look at a person with a fixed income and who before inflation did not have enough earnings for all needs, then after rising prices, he will have to fall in love with cheap rice instead of expensive potatoes, or change his country of residence. But in the new country, he will have more expenses for housing and medicine.

[Bananington]

so anyone understands that with rising inflation comes devaluation. but if you look at the example of agriculture, when the country has a poor potato harvest but a good rice harvest, should inflation occur?
Won't the poor stop buying expensive potatoes? It is logical that they will buy cheaper rice and there will be no inflation.

Inflation does not around only about the prices of the commodities, its actually based in a whole market sentiment of one country, the monetary policies also a big contributor for the inflation. Yes there’s an alternative but considering the generations now, we are still buying the things that we want even if its too expensive or even if there’s a cheaper alternative, and that’s how many deal with the inflation.

I think that only those people whose income is ahead of expenses can buy goods at higher prices. And if we look at a person with a fixed income and who before inflation did not have enough earnings for all needs, then after rising prices, he will have to fall in love with cheap rice instead of expensive potatoes, or change his country of residence. But in the new country, he will have more expenses for housing and medicine.

The existence and preference of alternatives is the best bet. Changing shopping locations can also find one in a place of better price offers compared to others.
One reason I think there's inflation is if the purchasing cost of the citizens in a country has risen, in that, they can afford alot with little cash and live fine. Where this is the case, we see the government increase interest rates, there's automatically inflation of prices and housing and almost all sector including energy gets hooked in.

[CarnagexD]

so anyone understands that with rising inflation comes devaluation. but if you look at the example of agriculture, when the country has a poor potato harvest but a good rice harvest, should inflation occur?
Won't the poor stop buying expensive potatoes? It is logical that they will buy cheaper rice and there will be no inflation.

Inflation does not around only about the prices of the commodities, its actually based in a whole market sentiment of one country, the monetary policies also a big contributor for the inflation. Yes there’s an alternative but considering the generations now, we are still buying the things that we want even if its too expensive or even if there’s a cheaper alternative, and that’s how many deal with the inflation.

I think that only those people whose income is ahead of expenses can buy goods at higher prices. And if we look at a person with a fixed income and who before inflation did not have enough earnings for all needs, then after rising prices, he will have to fall in love with cheap rice instead of expensive potatoes, or change his country of residence. But in the new country, he will have more expenses for housing and medicine.

This is hard to swallow fact but this is the truth about today's economy. I guess when the cost of goods and services rises faster than one's income, it can lead to difficult choices and lifestyle adjustments. People may need to prioritize essential expenses like housing and healthcare, often at the expense of discretionary spending on items they used to enjoy. Navigating the impact of inflation requires careful financial planning, budgeting, and, in some cases, seeking additional income sources or investment opportunities to counter the erosion of purchasing power.

[davis196]

OP, would you mind telling us why did you post this basic info about inflation and currency devaluation?
Is there any reason behind this decision?
Most of the people in the forum know a thing or two about macroeconomics and finance. Do you want to educate anyone? Are you simply sharing a bunch of generic thoughts? Are trying to boost your post count by writing low quality posts?
Sharing obvious conclusions like "the sun is hot" or "water is wet" have the same amount of logic like the conclusion that "inflation makes fiat money less valuable". Do you have any other genius and groundbreaking discoveries to share with us?

[AicecreaME]

Inflation is the most natural thing that happens in some corrupted governments around the globe.

And they are happy every single time inflation happens, because they are the only one that's being benefited by this kind of event. According to what I've read in google, inflation is a hidden tax, that's why government always try to minimize it only or ignore it because they don't want to waste the money of their own citizens because it is theirs already.

[slapper]

If we're talking about fiat money, it's like placing a bet on a game - once you're in, there's no turning back. Fiat, like a gambler's chip, has a set value, but that value can diminish with inflation. Devaluation is like when the house suddenly decides to reduce the value of your chips after a bad streak. The only difference? There's no "cash-out" option

Inflation? Think of it as the casino changing the game rules on you. When demand exceeds supply, or when there are sudden price hikes, that's the game being rigged. The value of your chips (fiat money) drops, and suddenly you're not playing with the same amount you thought you had

The strategy of devaluing to balance trade is equivalent to a gambler trying to diversify bets to minimize losses. And just as exporting more helps balance out devaluation, a gambler might choose games with better odds to try and even out the play

[STT]

Correct time frame for gold is about a decade, thats how long  its going to take to possibly setup a proper mining area and infrastructure to support the filtering and refinement of all your raw material.   If supply is taking ten years to come online it explains part of why the price can move so much before it starts to encourage more supply to come onlne.  Trying to judge it by weeks or months even and call it safe to invest I think is a mistake thats not fault of the element itself, alot of the pricing is speculation and reflection of the dollar.  We suffer the same effect in BTC and I try to seperate that rapid main market influence from the proper progression that BTC has over time.

[348Judah]

Inflation is the most natural thing that happens in some corrupted governments around the globe.

And they are happy every single time inflation happens, because they are the only one that's being benefited by this kind of event. According to what I've read in google, inflation is a hidden tax, that's why government always try to minimize it only or ignore it because they don't want to waste the money of their own citizens because it is theirs already.

There's a corrupt and manipulative force behind inflation and how the people go about the whole process with inflation to the extent of having a negative impact on the economy always, yet we cannot do without having this same inflation despite it's rendering the worth and value of fiat worthless gradually with time, am sure all these among other reasons are part of what makes other people to have decided for the new financial technology of bitcoin.

[bittraffic]

Inflation is the most natural thing that happens in some corrupted governments around the globe.

And they are happy every single time inflation happens, because they are the only one that's being benefited by this kind of event. According to what I've read in google, inflation is a hidden tax, that's why government always try to minimize it only or ignore it because they don't want to waste the money of their own citizens because it is theirs already.

There's a corrupt and manipulative force behind inflation and how the people go about the whole process with inflation to the extent of having a negative impact on the economy always, yet we cannot do without having this same inflation despite it's rendering the worth and value of fiat worthless gradually with time, am sure all these among other reasons are part of what makes other people to have decided for the new financial technology of bitcoin.

Happens all the time even in the not corrupt country since fiat is designed that way. It's not about demand and supply like OP is saying. It's always about printing bank notes that cause it but FED is also making it worse because of the interest hikes.

Since the FED wants to control inflation, they would need to start reducing the demand for commodities even the basics by increasing the prices through inflation or making companies bankrupt and no jobs for the people. When people buy less, demand decreases.

[doomloop]

Inflation is one of the economic terms that is often misunderstood. In a good economic system, controlled inflation is necessary to create value on the commodity and to force consumers to spend instead of displacing. As an example of the importance of inflation (in its simple sense, which means an increase in product prices), we can ask why prices do not increase in Japan^[1] and how It was bad for the economy^[2].

In general, inflation of 2% is good for most economies, and sometimes as long as the government can control inflation, the wheel of the economy will turn.
The problem comes from excessive and explosive inflation, where the government is unable to control inflation, prices increase daily, and the currency rate decreases, and this is what many believe is the concept of inflation.

Excessive inflation has internal causes related to state policies, external causes, and causes related to the structure of the economy. It is a symptom of a disease, and without identifying the cause of hyperinflation, the solutions will fail.

I definitely agree with that. Inflation in itself isn't that bad as long as it's not affecting people adversely and is just for the improvement of an economy. However, that isn't the case with most countries and their economies. The inflation that has hit most of the countries recently, particularly third-world countries, it's basically too much and it's affecting the people living in those countries that are not earning a lot of money to stand tall against the excessive inflation.

On the other side, the governments of these countries are basically busy building their and their families futures instead of taking care of the country and its economic structure that is devastated and people are dying of hunger because they can't buy the basic necessities due to the increasing inflation.

[justdimin]

OP, would you mind telling us why did you post this basic info about inflation and currency devaluation?
Is there any reason behind this decision?
Most of the people in the forum know a thing or two about macroeconomics and finance. Do you want to educate anyone? Are you simply sharing a bunch of generic thoughts? Are trying to boost your post count by writing low quality posts?
Sharing obvious conclusions like "the sun is hot" or "water is wet" have the same amount of logic like the conclusion that "inflation makes fiat money less valuable". Do you have any other genius and groundbreaking discoveries to share with us?

I would guess that this alone is a good enough reason to invest into bitcoin, that could be a reason? I mean it is one of the main reasons why I invest into bitcoin for example, because I know that if I keep my money in fiat then I am going to lose money and that is why I think it should be important to make it change. I get that it is not going to be that much of an important thing that will change it but at the end of the day it is going to be fine.

If you keep your money in bitcoin, then you are going to make a profit from it and if you make a profit from it then you are going to be fine with the results. If you keep it in fiat however, then you are going to lose money and you will be upset about it in the future.

[slapper]

OP, would you mind telling us why did you post this basic info about inflation and currency devaluation?
Is there any reason behind this decision?
Most of the people in the forum know a thing or two about macroeconomics and finance. Do you want to educate anyone? Are you simply sharing a bunch of generic thoughts? Are trying to boost your post count by writing low quality posts?
Sharing obvious conclusions like "the sun is hot" or "water is wet" have the same amount of logic like the conclusion that "inflation makes fiat money less valuable". Do you have any other genius and groundbreaking discoveries to share with us?

I would guess that this alone is a good enough reason to invest into bitcoin, that could be a reason? I mean it is one of the main reasons why I invest into bitcoin for example, because I know that if I keep my money in fiat then I am going to lose money and that is why I think it should be important to make it change. I get that it is not going to be that much of an important thing that will change it but at the end of the day it is going to be fine.

If you keep your money in bitcoin, then you are going to make a profit from it and if you make a profit from it then you are going to be fine with the results. If you keep it in fiat however, then you are going to lose money and you will be upset about it in the future.

Bitcoin's market dynamics are driven by supply, demand, speculative sentiment, and myriad geopolitical factors; not purely as a countermeasure to fiat devaluation

And this insinuation that holding fiat is a guaranteed route to financial ruin? It is quite the audacious claim. It is vital to diversify rather than placing all your eggs, or shall we say Satoshis, in one basket. While I, too, champion the transformative potential of Bitcoin, remember: broad assertions often overlook the nuanced economic interplay

Now, regarding profits from Bitcoin - yes, historical data suggests gains. However, past performance isn't a prophecy! Be cautious in your presumptions

[Jateng]

Fiat money is a fake money it's not real money. One should get knowledge about investment and businesses , if you are a business business owner, you can make column of assets and liabilities. Fiat money is managed and printed by Government, government can print money as his desire, in this way inflation occurs. Inflation occurs due to over print of Fiat money. Prices of things increases and goes to sky. If a government is wise he can give relief to public by solving problems of people. Inflation destroys
the country's base. And after, if it becomes uncontrolled, country can bankrupt. The whole power is in the hands of government. Government Can increase or decrease taxes and can make inflation or deflation.

[STT]

I dont agree it has to be fake, a few countries not many back every currency note with equal resources on demand; in main however FIAT means debt.   The intention for the value to be real is there but then politics occurs and standards slip.   The idea central banks arent compromised in their judgement is a make believe scenario, they can and are called to account by political entities quite often.   Human nature gives in to whats easiest, since people do expire in recessions from the job losses etc. I understand why people give up and abandon the value of money vs hard decisions.
  Its too tempting to pay every new bill with a freshly printed cheque paid for by someone else a few years from now.  No proper budget is required, with some countries this quickly fails as there is little demand for that currency or debt denominated.  The danger with a world reserve currency is there is always demand there and the people who pay the price for failure in a currency standard might be the other side of the world with no representation they dont matter.

[BVeyron]

Fiat money is a money or currency that is unable to change its function or pattern,which is signed and decreed as a legal tender.having this money is like owning an asset because you cant change it,but it can be use as an exchange for something.

This fiat money is a meduim of exchange in the form of coins,paper and all of that.since its existence it has been an easy way of exchange for demands and wants and has helped in reaching to the goals of oneself.which have made the approach and desires for this fiat money to be over emphasised.
But the insurgency of inflation have empowered the devaluation of this money.

Inflation is the general increase or rise in the prices of goods and services,when inflation is encountered it cause a total increase and alters the prices of goods and thus amount to the devaluation of fiat money.

What Causes inflation: For example when the demand for a particular products is higher than the supply,that way inflation has taken place.
                                          Another one is when prices goes up and affect everything including supply. And dont meet  up to a persons or country needs and wants.that way inflation has ocurred.
                                          Then Devaluation: The main power engine for inflation of this fiat money.This happens when a particular country is trying to adjust to the tendency of balancing the fiat money to balance with trade(Good and services).when this is done money or currencies value is reduced and make importation of goods to be downgraded and exportation of goods and services to be reduced.
The devaluation of this money has made exports to increase and importation to decrease,because since the money is devalued as inflation arised,the neccessity of meeting to that demand is reduced,and so therefore encouraging exportation of this goods would help in keeping It at a balance.

So i think this should be thrown into the house for better enlightenment and better discussion.

One of the main cause of inflation is excess fiat money in economic cycle. This leads to poor balancing of the overall system, and creates troubles with money distribution... Usually the process is be launched with "money printing press". However, there are some other sources of inflation. It can happen if "whales" get rid of some part of their overall money. In fiat world "whales" are richest tycoons and global banks. They can also be the cause of inflation. Also, they control inflation rate.

[Darker45]

This isn't the first time that I read that the increase of aggregate demand and/or the decrease of aggregate supply devalues money. Indeed, if the aggregate demand beats the aggregate supply, the price increases. The same is true when the aggregate supply falls, that's even if the aggregate demand is unchanged.

However, seldom is it mentioned that one of the biggest, if not the biggest, factors of fiat's devaluation is the irresponsible handling, or even outright abuse, of monetary supply. Central banks are printing so much money out of thin air. This money is backed by nothing so there's unlimited supply of it. Add to it that the banks and other financial institutions can also create unlimited amount of credit. All of these devalue money.

Why is this not properly emphasized in economics lectures, classes, and courses? Why are the abuses of governments and central banks barely mentioned when speaking of the weakening value of money when in fact they're the main culprit?

[martinex]

One of the main cause of inflation is excess fiat money in economic cycle. This leads to poor balancing of the overall system, and creates troubles with money distribution... Usually the process is be launched with "money printing press". However, there are some other sources of inflation. It can happen if "whales" get rid of some part of their overall money. In fiat world "whales" are richest tycoons and global banks. They can also be the cause of inflation. Also, they control inflation rate.

What you say is not wrong and it is what it is but there are many options out there to buy and sell Bitcoin. When most people think of buying Bitcoin using fiat currency. Yes. I hope the feeling of being part of the monetary revolution is the right feeling.

[adaseb]

There will always be inflation. However getting 10% inflation is not normal. It hurts many people living pay check to pay check and those that are savers.

Normally you should never hold cash in the bank. You need to have it in some form of investments such as stocks or even bonds. Right now you can get 5% with most bonds and it’s risk free pretty much. So with the inflation we got right now, you are pretty much breaking even.